Late last month, IBM announced its first big move under new CEO
Samuel Palmisano - its $3.5 billion purchase of
PricewaterhouseCoopers' consulting unit. It was said that IBM, not known
for growing through acquisitions, finalized the purchase in just 10
days.

Late last month, IBM announced its first big move under new CEO
Samuel Palmisano - its $3.5 billion purchase of
PricewaterhouseCoopers' consulting unit. It was said that IBM, not known
for growing through acquisitions, finalized the purchase in just 10
days.

There were two primary topics addressed in the coverage - why the deal
made sense for each partner. The amount of attention devoted to the
benefits to each company was fairly evenly divided.

Reports noted that PwC had been under pressure to end concerns about a
potential conflict of interest that it faced by providing both
consulting and accounting services to the same companies, especially in
light of all of the scandals of the past months. Analyst Peter Misek at
Scotia Capital noted that PwC "wanted to mitigate both actual and
perceived conflicts of interest (New York Daily News, July 31).

PwC was also praised for not just resolving the conflict-of-interest
problem, but doing so in a way that made Big Blue pay a sizable premium
over what many thought the unit could have earned in an IPO that was
imminent, despite the unfriendly nature of current IPO markets.

For IBM, the price was said to be just too good to pass up on a number
of levels. Merrill Lynch analyst Steven Milunovich told The Wall Street
Journal (July 31), "This is opportunistic and strategic. It reinforces
IBM's strategy to back out of hardware, and move more into services and
software. Many industry analysts described the deal as a steal for IBM,
pointing out that $3.5 billion is much less than the $18
billion Hewlett-Packard considered paying for PwC Consulting in
2000.

Other media reports also concurred with Milunovich on IBM's strategic
reasons for the deal. The Los Angeles Times (July 31) described the deal
as IBM's "bid to dominate the lucrative technology service market,"
which is worth $350 billion and growing. A number of reports went
on to mention that IBM's Global Services unit now generates more revenue
than the hardware it has traditionally been known for.

BusinessWeek (August 12) summarized many of the points seen throughout
the coverage: IBM's purchase was seen as "a bold move - one that has
prompted largely favorable reaction among industry watchers. It's easy
to see why. The acquisition meshes nicely with Big Blue's decade-long
transition from hardware maker to services giant."

Media reports described the union of the two businesses as a good
strategic fit, and that the two would likely complement each other
nicely. IBM was described as the world's biggest outsourcing provider of
technical services, while PwC Consulting's strength in more strategic
management consulting would help fortify what is currently perceived as
one of IBM's weaknesses.

Even more positively for the newlyweds, business reporters at many
outlets seemed to skate over their usual checklists of potential merger
pitfalls.

Most multibillion-dollar mergers or acquisitions generate acres of
coverage on how much the two companies overlap in certain areas, how
many layoffs might be expected, how the two corporate cultures might
clash, and/or how difficult it might be to integrate the two companies'
operations.

However, in the case of this deal, there was minimal coverage in each of
these areas, which is an encouraging sign for the prospects of the
union.

Evaluation and analysis by CARMA International. Media Watch can be found
at www.carma.com.